PARA 13.2|IC 67, Marine Insurance One Liner|Chapter-9 | Marine Claims

PARA 13.2|IC 67, Marine Insurance One Liner|Chapter-9 | Marine Claims

Insurance exams offered by the Insurance Institute of India (III), consist of various papers either in Life or Non Life or Combined. Here we are providing ONE LINER IC 67, Maine Insurance CHAPTER 9: Marine Claims for para 13.2 and III exam . These questions will be very helpful for upcoming promotional exam in 2020.

IC 67, Maine Insurance is a very important topic in insurance promotional exam. This IC 67, Maine Insurance paper comes in all GIPSA exams which makes it very important.


  1. A claim upon a policy of marine insurance goods may arise upon the happening, as the result of insured perils, of any of the following:
  • Total loss: actual or constructive
  • Particular average, that is, partial loss
  • General Average (GA) loss
  • Expenses which are:

i)Sue and labour charges and particular charges

ii) Salvage charges

iii)Forwarding expenses

iv) Extra charges

2.all the above types of loss are recoverable under appropriate sets of Institute Clauses for Hull (e.g. Institute Time Clauses Hull 1.10.83) and Cargo (Institute Cargo Clauses 1.1.82).

  1. Total loss: Marine total losses fall into two categories: actual total loss (ATL) and constructive total loss (CTL).
  2. Actual total loss: Actual total loss of the subject matter is said to have occurred:
  • When it is destroyed, that is, physical destruction by a peril insured against, such as sinking in deep during heavy weather sea or after collision or destruction by fire or by enemy in times of war; or,
  • When it loses its species, that is, it is so damaged that it is no longer a thing of the kind insured, e.g. where a shipment of dates is so badly damaged by sea perils that they are condemned as unfit for human consumption, or when cement turns into concrete following contact with water; or,
  • When the assured is irretrievably deprived thereof, as when a ship and cargo are captured and condemned in the times of war.
  • When the goods are in a ship that has been posted as “missing”. A missing ship may be presumed an actual total loss when after the lapse of a reasonable time, no news of her is received.
  1. Section 56 of the Marine Insurance Act, 1963 provides that where goods reach their destination in specie, but by reason of obliteration of marks or otherwise, they are incapable of identification, the loss, if any, is not a total loss but must be dealt with as a partial loss
  2. Indemnity: Measure of indemnity for actual total loss is the insured value under the policy.
  3. Constructive total loss (CTL): This arises should all or any of the following occur:
  • When the actual total loss of the goods appears to be unavoidable.
  • When the goods could not be preserved from actual total loss without an expenditure that would exceed their value.
  • When the assured is deprived of the possession of his goods and it is unlikely that he can recover them or the cost of recovery would exceed their value when recovered.
  • Where the cost of repairing damage and forwarding the goods to their destination would exceed their value on arrival.
  • Where there is a loss of voyage namely, where there is a practical and effective impossibility of ever sending the goods to their port of destination.
  1. For cargo, the criteria are the cost of recovery, reconditioning the cargo and forwarding it to its destination. If the costs of these exceed the value on arrival at destination, a CTL may be claimed.
  2. CTL claim notice to insurer: To substantiate a claim for CTL, the assured must give notice of his intention to abandon the goods or the ship as the case may be, to the underwriter and claim a CTL.
  1. Acceptance of notice by insurer If the insurer accepts the notice, he admits liability for the claim and accepts the responsibility for whatever may remain of the goods.
  2. Indemnity: Measure of indemnity for CTL is the sum insured less any proceeds of sale which are due to the insurers.
  3. Particular Average: Particular average is partial loss or partial damage caused fortuitously by a peril insured against and thus does not include damage voluntarily incurred, such as General Average damage.
  4. The measure of indemnity for Particular Average to cargo varies according to:
  • Whether it takes the form of loss of part of the cargo or
  • cargo arriving damaged at the destination
  1. Total loss of part of cargo: Where part of the goods are totally lost, the amount payable under the insurance is such proportion of the insured value as the insurable value of the part lost, bears to the insurable value of the whole.
  2. A policy is apportionable where different species of goods are insured by the same contract, e.g. tobacco and coffee or where separate valuations of the goods are agreed.
  3. The loss of a whole species or of all the goods clubbed in one valuation is recoverable as a total loss.
  4. The insurable value according to Section 18(3) of the Act is the prime cost of the property insured plus expenses of and incidental to shipping and the charges of insurance upon the whole. This is known as the CIF value.
  5. Gross value: Means the wholesale price, or if there be no such price, the estimated value with, in either case, freight, landing charges and duty paid before hand; provided that, in case of goods customarily sold in bond, the bonded price is the gross value.
  1. Gross proceeds: Means the actual price obtained at a sale where all charges on sale are paid by the sellers.
  1. The use of “gross” values is to insure that the insurer’s liability for the loss is not prejudiced by fluctuations in market values.
  2. Appropriate clauses: “Pickings Clause”, “Cutting Clause”, etc. are inserted in the policies by which the insurers agree to pay for such losses irrespective of percentage and they are credited with proceeds.
  3. Salvage Loss: It may happen in the event of cargo sustaining damage that it can be sold in it’s damaged state at a place short of its destination to better advantage than if it is reconditioned and forwarded
  1. the difference between the insured value and the NET proceeds of sale is known as “Salvage Loss”.
  2. A duty is imposed on the assured by common law that he should at all times act as if he were uninsured. In other words, he should take all reasonable measures to avert or minimise a loss to his property.
  3. to take all practical steps to avert or minimise loss or damage, the ICC clause contain what is known as the Duty of Assured Clause” (clause 16). Similar provision appears under clause no. 13 of “Duty of Assured” (Sue and Labour).
  4. General average expenses are not included as sue and labour charges. Sue and labour charges are incurred short of destination.
  5. Section 64 (2) of Marine Insurance Act, 1963 states that expenses incurred by or on behalf of the assured for the safety or preservation of the subject matter insured, other than GA and Salvage Charges, are called Particular Charges.
  6. Particular charges are not included in particular average.
  7. the difference being that sue and labour charges are incurred short of destination whereas particular charges may be incurred at destination.
  8. sue and labour follows upon loss or damage, whereas particular charges may be incurred when the loss is threatened or imminent but is avoided by expenses for that purpose.
  9. Forwarding charges The Institute Cargo Clauses (ICC) include a Forwarding Charges Clause (clause – 12) which states that when the insured transit is terminated at a port or place other than the policy destination as a result of the operation of an insured peril, the insurers agree to reimburse the assured for any extra charges properly and reasonably incurred in unloading, storing and forwarding the insured goods to the policy destination.
  1. It is important to note that these expenses are reimbursed only when the transit is terminated short of destination by an insured risk and such reimbursement is subject to any exclusions specified in the clauses.
  2. The Forwarding Charges Clause does not apply to general average or salvage charges, nor shall it include charges arising from the fault, negligence, insolvency or financial default of the assured or their servants
  3. Extra charges: The expenses of protests, survey and other proofs of loss, including the commission or other expenses of a sale by auction are examples of “extra charges”.
  1. the claimant has to do two procedures for claim:
  2. One with insurers; and ii Other with carriers and bailees
  3. The procedure with carriers and bailees is required because they are the primary parties who handle the cargo and loss, if any, arises because of their improper handling of the cargo.
  4. Documents may be filed with the customs 15 days before the expected arrival of the vessel and custom formalities completed, to facilitate easy clearance of cargo after landing.
  5. In respect of goods arrived by sea the assured or his agent is required:
  • To claim immediately on the Carriers, Port Authority or other bailees for any missing packages;
  • To apply immediately for a survey by the ocean carrier / Port Authority, if any loss or damage be apparent and claim on them for any actual loss or damage found on such survey.
  • In respect of containerised cargo, the insured must ensure that the container and its seals are examined immediately on discharge from the overseas vessel.
  • If the container is delivered damaged or with seals broken or missing or with seals other than those as stated in the shipping documents, the Delivery Receipt should be claused accordingly and the insured should retain all defective or irregular seals for subsequent identification.
  • In no circumstances, except under written protest, the insured should give clean receipts to carriers / bailees / other third parties where goods are in doubtful condition.
  • The insured should give written notice to the carriers / bailees within three days of landing of the goods, if loss or damage thereto was not apparent at the time of taking delivery.
  1. In respect of goods arrived by rail:
  • The consignee should take examined delivery from the Railways of any packages, which are outwardly damaged or appear to have been tampered with and obtain a certificate of damage and / or shortage.
  • If examined delivery is refused, suitable remarks as to the condition of the packages and contents thereof should be made in the Railway Station Delivery Book or on the negotiable copy of the Consignment Note in case of despatches by road or aircraft.
  • In the case of packages which are in a outwardly sound condition, but deficient in weight, the consignee should take weighment / examined delivery and obtain a Certificate of Shortage from carrier if deficiency in weight is proved.
  • The consignee should issue notice of claims against the carriers within the statutory time limits, as applicable.
  1. The Insurance Act,1938 requires that claims exceeding Rs. 20,000 should be surveyed by a surveyor holding a valid license from the Controller of Insurance
  2. It is not necessary to appoint any surveyors in respect of:
  • Short landing or landed but subsequently missing cargo claims; or
  • Those arising from sinking of vessel; or
  • Where documentary evidence of value of the loss is available in the form of police reports, short landing/non delivery certificates issued by port trust, railways or other public or semi government authorities; or
  • Sling loss claims certified by harbour authorities
  1. The survey fees payable depends upon:
  • The type of survey, i.e. Whether it is of technical nature or not requiring a degree of technical skill,
  • Time spent,
  • Labour required,
  • Place of survey,
  • Proficiency and experience of surveyor employed, and
  • Whether any help was taken from a specialist or consultant
  1. In case of partial loss / damage:
  • Open assessment report by the carrier and / or
  • Survey report of surveyor appointed by insurers
  • Ship survey report (sea consignment)
  • Claim form and claim bill
  • Copies of correspondence exchanged with carriers, wherever recovery from carriers is possible
  1. In respect of marine claims arising and payable outside India, they are adjusted and settled by Claims Settling Agents named in the Policy.
  2. the permission of the Foreign Exchange Control Authorities in India has to be obtained, by making an application for remittance.
  3. For a partial loss, the amounts payable under the policy, subject to any “deductible” provided therein, are as follows:

This includes claims for the followings:

  • Particular average (PA)
  • General average (GA)
  • Salvage charges (SC)
  • Sue and labour charges (SLC)
  • Collision liability (CL)
  1. Particular average: The reasonable cost of repairs effected, but not exceeding the sum insured in respect of any one casualty. Under ITC-Hulls 1.10.83, there is no deduction “new for old”.
  2. General average (GA) : For GA expenditure incurred by the ship owner, the amount payable by the hull underwriter is the proportion which falls upon the insured ship owner.
  3. General average (GA) : For GA contribution, the policy will pay the proportion attaching to the ship
  4. In both these instances i.e. in case of GA expenditure as well as GA contribution, the claim is subject to the contributory value of the ship being fully insured, and if it is not, the claim will be reduced in proportion to the underinsurance.
  5. Salvage charges (SC): The amount payable under the policy is computed in the same way as for

general average expenditure.

  1. Sue and labour charges (SLC): The full sum expended subject to the ship being fully insured.
  2. Collision liability (CL): This is a supplementary cover over and above the insurance on the vessel

itself, to the extent of ¾ths of such liability but not exceeding ¾ths of the sum insured on the vessel. Legal costs are also payable.

  1. In all cases, whether a claim is presented upon a policy of marine insurance or is submitted in general average, the claimant has the burden of proving his claim.
  2. The assured must produce evidence to show:
  • That loss / damage was caused by an insured peril; and
  • The extent of the claim
  1. in the event of non-compliance with the terms of the Notice of Claim & Tenders Clause (No. 10), a penalty of 15% is to be deducted from the ascertained claim.
  2. Owners should give notice also to the P&I Association in any case involving loss or damage to cargo and when there is possibility of a claim for GA contribution from cargo interests and they should possible liability claims arising from the accident.
  3. If the casualty is serious, the ship owner will wish to send a marine superintendent and / or an engineer superintendent to the casualty or to port to which the damaged ship is proceeding, in order to obtain their reports on the situation and extent of damage.
  4. Adjustment of the claim is recorded by the Average Adjuster in a statement which is carefully prepared after going through all the aspects of the claim, insurance cover, surveyors’ recommendations and other evidences.
  5. It is desirable at this stage that the damage sustained by the ship be surveyed jointly and concurrently by the ship owner’s superintendent(s) and the surveyor appointed by the insurers.
  6. Claims relating to ocean-going vessels, involve commitments and final disbursements in foreign exchange, particularly under following circumstances:
  • Guarantees provided on behalf of the assured for Salvage Charges and / or Collision Liability
  • Satisfying arbitration awards relating to salvage remunerations
  • Reimbursement of collision liabilities
  • Legal expenses relating to Salvage Award, Arbitration and Collision Liability
  1. Documents required for the settlement of Fishing Vessels Hull claims are as follows:
  • Survey and / or Investigation Report
  • Registration Certificate, if any, issued by the concerned authorities
  • Weather Report for the relevant date and time from the competent authority in case adverse weather conditions are involved
  • Affidavits and / or statements by the Owner, Tindal or any member of the crew, if made to any of the authorities
  • Certificate of cancellation of registration of vessel in respect of Total Loss claims
  1. Fixed Jetties and Pontoons: Since these are fixed structures, it is advisable to process such claims as “engineering claims”
  2. Concept of general average (GA): A definition of GA is found in Section 66 of Marine Insurance Act, 1963 and in Rule A of the York-Antverp Rules, 1974.
  3. A GA loss may be either a sacrifice or an expenditure, extraordinary in nature, voluntarily and reasonably incurred, in time of general peril, for the common safety of the maritime adventure. When all these essentials are present, there is said to be a GA act.
  4. Some examples of GA are:
  • A loaded vessel which has stranded and is fast running aground, may jettison part of her cargo into the sea to lighten her draft for refloating purposes.
  • Occasionally, cargo is jettisoned to reach the seat of a fire and the resulting losses will all be treated as GA sacrifice
  1. Contributory values: It is important to note that the GA loss must have been successful and the ship and cargo should actually arrive at destination.
  2. If, due to either the original or some subsequent accident, the ship and cargo are lost, there are no arrived values at destination and therefore no GA.

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